Correlation Between Erste Group and Andritz AG

Can any of the company-specific risk be diversified away by investing in both Erste Group and Andritz AG at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Erste Group and Andritz AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Erste Group Bank and Andritz AG, you can compare the effects of market volatilities on Erste Group and Andritz AG and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Erste Group with a short position of Andritz AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and Andritz AG.

Diversification Opportunities for Erste Group and Andritz AG

0.85

Correlation Coefficient

Erste Group  Andritz AG

Very poor diversification

The 3 months correlation between Erste and Andritz is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Andritz AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andritz AG and Erste Group is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Erste Group Bank are associated (or correlated) with Andritz AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andritz AG has no effect on the direction of Erste Group i.e., Erste Group and Andritz AG go up and down completely randomly.

Pair Corralation between Erste Group and Andritz AG

Assuming the 90 days trading horizon Erste Group is expected to generate 1.36 times less return on investment than Andritz AG. In addition to that, Erste Group is 1.52 times more volatile than Andritz AG. It trades about 0.07 of its total potential returns per unit of risk. Andritz AG is currently generating about 0.15 per unit of volatility. If you would invest  4,898  in Andritz AG on December 30, 2024 and sell it today you would earn a total of  742.00  from holding Andritz AG or generate 15.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Erste Group Bank  vs.  Andritz AG

Erste Group Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Erste Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Andritz AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Andritz AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Andritz AG demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erste Group and Andritz AG

The main advantage of trading using opposite Erste Group and Andritz AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, Andritz AG can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Andritz AG will offset losses from the drop in Andritz AG's long position.

The idea behind Erste Group Bank and Andritz AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.